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Big lenders begin to find stable ground

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The latest signs of change came Friday when Bank of America announced it would purchase Countrywide Financial, the largest US mortgage lender, for about $4 billion. "It shores up what had been the poster child for the subprime mess," says Bill Knapp, investment strategist at New York Life Investment Management in New York.

At the same time, reports have emerged that JPMorgan Chase is in discussions to purchase Washington Mutual, another financial institution damaged by losses in the housing market. "It's a case of the stronger players coming in to pick up the spoils," says Mr. Knapp.

Financial experts anticipate yet more consolidation, especially among the companies that analyze and insure loans. "Some of those bond insurers are very attractive to major investors," says Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Ore. "There is some speculation that Warren Buffett might want to pick one up."

Mr. Buffett, an investor based in Omaha, Neb., has recently started his own bond-insurance company.

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